There is a new way to save for your child’s future! The Internal Revenue Service (IRS) just released a guidance on the new “Trump Accounts”, which is a new type of retirement savings account for qualified children. Here is a breakdown of what families need to know.

What is a Trump Account and Who Can Have One? 

A Trump Account is a new type of traditional individual retirement account (IRA), created under the One Big Beautiful Bill Act (OBBBA), designed for children under 18 years of age. The child must have a valid Social Security Number (SSN) to qualify. 

To open a Trump Account, the parent or guardian must elect to create an account on behalf of the child by using the IRS Form 4547, Trump Account Election(s) or via an online tool. However, although it has already been approved, contributions to Trump account can only be begin after July 4, 2026. 

The funds deposited in Trump accounts shall be invested in certain mutual funds or exchange traded funds that track the 500 leading U.S. public companies or another index of primarily American equities. 

 
The $1,000 Pilot Program Bonus 

Eligible children, who is a U.S. citizen and is born between 2025 and 2028, will be granted a $1,000 bonus deposit from the federal government as part of their pilot program contribution. 

This serves as a starter amount to help their child’s investment grow over time without requiring any initial contribution from the family. In addition, the $1,000 pilot contribution will not be counted against any contribution limits. 

 
Contribution Rules and Limits 

There is a $5,000 contribution limit per year, subject to inflation adjustments starting year 2027. Anyone can add to the contributions, parents, grandparents, relatives, and even employers but they shall count toward the contribution limit. Below are other rules that apply: 

• The $1,000 pilot program contribution does not count against this limit. 

• Employers may contribute up to $2,500 per year and will be counted towards the $5,000 limit per year.  Employer’s contributions shall not be part of the employee’s taxable income. It must be noted that the $2,500 limit is per employee and not per dependent. Therefore, even if an employee has two or more dependents, the employer can only contribute up to $2,500 per year for all the Trump Accounts. 

• Qualified general contributions such as those funded by state or political subdivisions or tax-exempt organizations are not subject to the contribution limit. 

All contributions except those from employers, government or charitable institutions, are not tax deductible. 

Withdrawal Rules and Exceptions 

In general, withdrawals from a Trump Account are not allowed until the child turns 18 years old. There are a few exceptions to this such as in the case of excessive contributions, qualified rollover of contributions, and death of the beneficiary. 

Once the beneficiary turns 18, the Trump account shall be treated and be subject to the rules of a traditional IRA. 

Want to learn more?  

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